In this consultation paper (CP), the Prudential Regulation Authority (PRA) proposes a supervisory statement that sets out the PRA’s expectation of compliance with prudential provisions in the PRA Rulebook for run-off firms in the general insurance sector.
The PRA set out its expectations regarding the factors that senior management of general insurance firms in run-off should take into account when considering making a request to the PRA to extract capital from the firm during the course of a run-off in Supervisory Statement 4/14. This statement also explains the approach the PRA takes when considering such requests.
The updates proposed to this statement reflect the changes to the PRA Rulebook that will occur when the new Solvency II and non-Directive firm regimes come into force on 1 January 2016. The updates to this draft statement do not represent a change in PRA policy but do set expectations of how the Own Risk and Solvency Assessment (ORSA) should be used when making decisions about whether to apply for a capital extraction. In particular, the PRA expects that firms will not seek a capital extraction that would bring the level of capital below its overall solvency needs as set out in the firm’s ORSA, even if this figure is above the solvency capital requirement.